The U.S. Legal industry – How can you thrive in a crowded market with limited demand growth?
“Dad, are you getting back on the plane to go back to work now?” A reasonable question as we arrived in Florida for a family vacation, if I were a pilot or flight attendant. Since I was neither (I was a VP of an international Fortune 500 company) it took a second to understand what my 3-year-old daughter meant. This was the end of June and I had traveled 22 weeks that year. Many of you know what that is like. For me, it was the wake-up call that had me start The Advocates 15 years ago.
I wanted to share what I had learned running a region placing 2000 people in jobs per week and working with Anderson Consulting, The Hay Group, Egon Zehnder, and other leading consultancies. I thought we could build a strategic search firm (and a staffing company, TLSS) that helped our clients increase productivity, build strategic locations, and over time reduce their turnover to improve results. In Denver, we’ve achieved much of this. Now that my 3-year-old is off to college, I am committing us to build out a company that more fully realizes the above goals for our clients nationally thereby creating more opportunities for our employees. I hope you enjoy our first blog!
The law is big business….
U.S. Legal Services are expected to be about $437 billion annually with law firms accounting for approximately $276 billion in revenue.[i] U.S. Legal Services control a total payroll exceeding $114 billion per year.[ii]
We serve many competitive and fast-growing markets: Denver, Colorado; Dallas, Houston and Austin, Texas; and Los Angeles, California among others. According to the most recent Census data, for example, law firms account for more than 14,600 jobs with a payroll exceeding $1.6 billion in the Denver metropolitan area alone. In Houston, the figure is an astounding $2.6 billion, and in Dallas over $2.4 billion per year.
The financial health of the major metro areas’ law firms is obviously an important part of their overall economic picture. These are also five of the most competitive markets for new law firm entrants in the country. As you know if you’ve tried, only a small percentage of non-local entrants in any of these markets have managed to thrive and establish a true full-service presence. In fact, the firms that thrive in these markets are often the same ones thriving generally: 15 Firms of the AmLaw 50 and a very few firms in the overall AmLaw 200 beyond that.
Why some firms thrive and others struggle….
In studying law firms, meeting with the leaders of many AmLaw 200 firms as well as the leadership of smaller, more regional firms, the factors to success become clear.
According to our research on 100’s of firms of all sizes, the most profitable law firms, in any market, successfully execute the following strategies to more fully leverage their human capital, improve profitability and ensure long term financial health:
- Differentiate: The mid-life crisis question applies here: Who am I? Do you understand your value proposition for all stakeholders and have you set up systems to have everyone row your boat in the same direction? Focus on your strengths in terms of your people, your practice areas, service delivery, and niche(s).
- It’s hard to row a leaking boat: Successful firms have low turnover and recruit and on-board more successfully. You need to understand what is making your people leave. Too often we hear that the people leaving were not a fit, not cutting it, etc. Yet, when you lose an average of almost 14% of your attorneys every 12 months that cannot be true and you cannot grow.[iii] I would argue that this is the greatest issue confronting law firms that are not meeting their goals. Hire well, work on onboarding and weaving new hires into your cultural fabric and client network, and train attorneys at all levels.
- Leverage compensation and rewards programs at every level to reward behavior that drives your differentiators, in a way that is culturally appropriate to your firm.
- Focus & Employ efficient decision making Don’t be perfect, be nimble, and focus on your core strengths. No-one can be all things to all clients.
We will discuss these four points in greater detail in future posts.
[i] Legal Executive Institute, “How Big is the US Legal Services Market?”
[ii] BLS Data 2017
[iii] The Advocates Study of Turnover at National Firms from Leopard List and other resources.
Mr. Ollig gleaned these insights through his work with Colorado businesses as the Lt. Governor’s small business liaison, his sixteen years of management experience, and in current capacity running The Advocates, a search and workplace consulting firm for attorneys and the legal field. As Vice President, Western Region, for the international Fortune 500 staffing firm Randstad, N.A., Mr. Ollig was instrumental in successfully opening new offices and turning around several underperforming businesses. Currently, as President of The Advocates he has had the opportunity to interview hundreds of managing partners, thousands of partners, and others involved in law firm management to gain insights about the common strengths of the most successful law firms.
Read more about Marcus here.